Written by MarketBeat Stocks
July 16, 2021
For the better part of the last year, Congress has had “big tech” in its crosshairs. But the reasons why largely depend on what side of the aisle a particular individual was on.
On the one hand, there are politicians who are concerned about the role that technology companies play in restricting the free flow of information. On the other hand, there are politicians that are concerned about these companies' stranglehold on competitors and innovation.
But big tech scored an important, albeit not final, victory in late June. At that time, a U.S. judge dismissed two separate complaints against Facebook (NASDAQ:FB). The question in front of the judge was whether Facebook held a monopoly on social media. Due to a surge in the company’s stock price after the ruling, Facebook became a member of the exclusive $1 trillion market cap club.
While big tech companies will remain under the Congressional microscope, there’s no denying that investors are looking at the ruling as a signal to rotate back into tech stocks. And that’s the focus of this presentation. What tech stocks should you be buying as anti-trust pressure eases?
It would be easy to start and end the list with the FAANG stocks. After all, the motto “Keep it Simple Stupid” comes to mind. There are simply those companies that offer products that are changing our lives now and will continue to do so in the future. And furthermore, customers will continue to pay for their products.
And I do have a couple of these stocks on my list. But the bulk of the stocks on this list are less expensive alternatives to at least one of the FAANG stocks. It doesn’t mean they’re superior companies, but a rising tide tends to lift all boats. And that means these companies have a large upside and you can purchase the stocks for a lot less.
Quick Links
- Alphabet
- Apple
- Shopify
- Overstock.com
- The Trade Desk
- Roku
- Spotify
#1 - Alphabet (NASDAQ:GOOGL)
It would be irresponsible to leave Alphabet (NASDAQ:GOOGL) off this list. The parent company of the ubiquitous search engine has a massive $1.7 trillion market cap. GOOGL stock is up 47% in 2021 making it the odds on favorite for the best FAANG stock of 2021. Out of 43 analysts that cover Alphabet, 42 give the stock a buy rating.
If you want to look at Alphabet as a play on digital advertising, I won’t stop you. “Google” has become a verb after all. But investors who are paying over $2,000 a share for the stock are looking at the company for its optionality.
Simply put, Alphabet is placing bets in all of the major sectors that will be part of the “new economy” such as its Google Cloud service. I’m not suggesting that Alphabet is a major player areas such as data, machine learning, AI, etc. However, they don’t have to be. At this point, simply hitting on one or two will keep this growth stock humming along.
About Alphabet
Alphabet Inc offers various products and platforms in the United States, Europe, the Middle East, Africa, the Asia-Pacific, Canada, and Latin America. It operates through Google Services, Google Cloud, and Other Bets segments. The Google Services segment provides products and services, including ads, Android, Chrome, devices, Gmail, Google Drive, Google Maps, Google Photos, Google Play, Search, and YouTube.
Read More - Current Price
- $175.98
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 35 Buy Ratings, 7 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $205.90 (17.0% Upside)
#2 - Apple (NASDAQ:AAPL)
Another FAANG stock to make this list is Apple (NASDAQ:AAPL). Like Alphabet, Apple is simply a gigantic company that carries a market cap of $2.48 trillion as of this writing.
In September, Apple is launching the latest version of its iPhone. To capitalize on this 5G-fueled iPhone supercycle, Apple has ambitious plans to manufacture 90 million of the devices this year.
However, the narrative about the company being “just about the iPhone” is hopefully being put to bed. The long waiting list for its products due to the global chip shortage is a testimony to the stickiness of Apple as a brand.
That was backed up in the company’s most recent earnings report when the company reported revenue that was 50% higher for the year. This easily exceeded analysts’ expectations. But that’s something investors have come to expect from Apple.
Moving forward, Apple already is displaying growth in its Services and Wearables sectors. It has launched a new version of Apple TV. And the company is said to be dabbling in the area of autonomous vehicles.
About Apple
Apple Inc designs, manufactures, and markets smartphones, personal computers, tablets, wearables, and accessories worldwide. The company offers iPhone, a line of smartphones; Mac, a line of personal computers; iPad, a line of multi-purpose tablets; and wearables, home, and accessories comprising AirPods, Apple TV, Apple Watch, Beats products, and HomePod.
Read More - Current Price
- $229.00
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 23 Buy Ratings, 11 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $235.25 (2.7% Upside)
#3 - Shopify (NYSE:SHOP)
The growth of Shopify (NYSE:SHOP) is perhaps the best argument that Amazon (NASDAQ:AMZN) should not face anti-trust regulation. Shopify has an e-commerce platform that allows entrepreneurs and businesses to build an online store even if they have no experience in web design.
By placing Shopify on this list (and leaving Amazon off) it’s not suggesting that investors should avoid Amazon. If you hold AMZN stock I have two words for you, don’t sell.
However, if you were looking to enter a new position, I’d suggest that Shopify may be less noisy while still delivering solid growth. For the better part of 2021, SHOP stock was caught in the conscious decision of investors to rotate out of tech stocks. However, that’s changed in a big way in the last two months and SHOP stock is now sitting on a nifty gain of over 31% for the year.
The analyst community seems to agree. At the end of June, SHOP stock received three price target upgrades suggesting that the stock has a nearly 20% upside.
About Shopify
Shopify Inc, a commerce company, provides a commerce platform and services in Canada, the United States, Europe, the Middle East, Africa, the Asia Pacific, Australia, China, and Latin America. The company's platform enables merchants to displays, manages, markets, and sells its products through various sales channels, including web and mobile storefronts, physical retail locations, pop-up shops, social media storefronts, native mobile apps, buy buttons, and marketplaces; and enables to manage products and inventory, process orders and payments, fulfill and ship orders, new buyers and build customer relationships, source products, leverage analytics and reporting, manage cash, payments and transactions, and access financing.
Read More - Current Price
- $103.97
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 24 Buy Ratings, 16 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $94.95 (8.7% Downside)
#4 - Overstock.com (NASDAQ:OSTK)
Were you aware that Overstock.com (NASDAQ: OSTK) was one of Amazon’s largest competitors in terms of sales volume? I didn’t. But if you did, then I hope you’ve taken advantage of the $2.3 billion in revenue the company posted in 2020. The company has also now posted profitable earnings for four consecutive calendar quarters.
The company is focused on home furnishings and décor which were two sectors that were very popular during the pandemic. Millions of Americans were forced to look at their surroundings every day. And with few other entertainment options, they decided to put money into their homes. That trend is likely to continue throughout 2021 as the home-building market remains strong.
Analysts give OSTK stock a consensus buy rating with a potential upside of 32%. Beware of the short interest on this stock. It’s currently under 10%, but that wasn’t the case earlier in the year. However, if you have an appetite for risk, and a long-term outlook, this is a stock that looks to have plenty of upside.
About Overstock.com
Overstock.com, Inc operates as an online retailer in the United States. It offers furniture, décor, area rug, bedding and bath, home improvement, outdoor, and kitchen and dining items. The company provides its products and services through its internet websites comprising overstock.com, o.co, overstock.ca, and overstockgovernment.com.
Read More - Current Price
- $0.00
- Consensus Rating
- N/A
- Ratings Breakdown
- 0 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
#5 - The Trade Desk (NASDAQ:TTD)
As a veteran of advertising and marketing communications agencies, I appreciate what The Trade Desk (NASDAQ: TTD) brings to the table. The company operates a cloud-based platform that allows “ad buyers” to create, manage, and optimize data-driven digital advertising campaigns. And they can do so using different ad formats.
This made The Trade Desk a big winner during the pandemic as many advertisers raced to capture the eyeballs of consumers who were quite literally a captive audience. In fact, TTD stock was growing so fast that the company executed a 10-for-1 stock split in June to make its shares more accessible. So far, investors have reacted positively to the split. Shares are up over 20% in the last month.
Keeping shares affordable may turn out to be a savvy move since one of the obstacles for The Trade Desk is that it competes with the “Walled Gardens” of competitors such as Amazon Web Services and Facebook.
About Trade Desk
The Trade Desk, Inc operates as a technology company in the United States and internationally. The company offers a self-service cloud-based platform that allows buyers to plan, manage, optimize, and measure data-driven digital advertising campaigns across various ad formats and channels, including video, display, audio, digital-out-of-home, native, and social on various devices, such as computers, mobile devices, televisions, and streaming devices.
Read More - Current Price
- $123.90
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 25 Buy Ratings, 3 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $122.65 (1.0% Downside)
#6 - Roku (NASDAQ:ROKU)
By now, you’re probably catching on that several stocks on this list are alternatives to one of the FAANG stocks. In the case of Roku (NASDAQ: ROKU), I’m seeing it as having a bit more upside than Netflix (NASDAQ: NFLX).
The pandemic couldn’t have come at a better time for Netflix. The streaming giant was starting to feel the weight of content generation weighing on its stock. But the pandemic gave the stock a lift, literally. NFLX stock charged ahead nearly 40% from the pandemic selloff in March until the end of 2021. But in 2021, the stock is only up 3.8%.
Roku by contrast was also a pandemic winner, climbing over 300% from March 2020 until the end of the year. But ROKU stock is up nearly 28% in 2021. And while the consensus of analysts suggest that growth may be slowing, recent price targets tell a different story. One reason for this is that Roku is not just a device on which content is viewed, the company is beginning to create its own content.
About Roku
Roku, Inc, together with its subsidiaries, operates a TV streaming platform in the United states and internationally. The company operates in two segments, Platform and Devices. Its streaming platform allows users to find and access TV shows, movies, news, sports, and others. The Platform segment offers digital advertising, including direct and programmatic video advertising, media and entertainment promotional spending, and related services; and streaming services distribution, such as subscription and transaction revenue shares, and sale of premium subscriptions and branded app buttons on remote controls.
Read More - Current Price
- $68.71
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 14 Buy Ratings, 8 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $84.67 (23.2% Upside)
#7 - Spotify (NYSE:SPOT)
Spotify (NYSE: SPOT) continues to dominate the global market for subscription music streaming. However, in the first half of 2021, its market share is shrinking slightly as more competitors enter the space. One concern among industry observers is that Spotify is starting to lose the younger Gen-Z consumers to other streaming music platforms.
However, Spotify has been pivoting to more reliance on podcasts. In fact, the company has been investing a tremendous amount of money (up to $ 1billion) to buy content. The company is playing the long game. But there’s reason to believe it will work and if it does, SPOT stock will look like a bargain at its current price.
Speaking of the stock, SPOT stock climbed over 150% from its pandemic low until the end of 2021. But the stock has gotten whacked since then and is down 20% for the year. However, analysts are forecasting the stock to recover all those gains in the next 12 months.
About Spotify Technology
Spotify Technology SA, together with its subsidiaries, provides audio streaming subscription services worldwide. It operates through two segments, Premium and Ad-Supported. The Premium segment offers unlimited online and offline streaming access to its catalog of music and podcasts without commercial breaks to its subscribers.
Read More - Current Price
- $470.24
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 23 Buy Ratings, 5 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $421.69 (10.3% Downside)
I’m a cynic so I believe that this anti-trust talk is much ado about nothing. Politicians on both sides of the aisle are already beginning to position themselves for the 2022 mid-term elections. To some people that would suggest that Congress will want to do something.
However, since mid-term elections have historically been better for the minority party, I would expect that the Democrats will have much more urgency to get a bill passed that shows they’re doing something.
But what will that look like? I think it will mostly niggle at the edges. There may be some rules that make it harder for these companies to make acquisitions. They may make a token effort to trim the “walled gardens” that allow these companies to thrive. But I believe any substantive regulation will be left for another day.
That means that tech stocks will be a solid bet not just for the rest of 2021 but well into 2022 as well. Consider these stocks and let us know if you have other stocks that you believe should make this list in the future.
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